San’an Optoelectronics: silicon carbide+filter tap

This article is from the report “China’s Wolfspeed is sailing” issued by Founder Securities Research Institute on December 7, 2021. For details, please read the original report
9000 pages · Research framework · Series links: CPU l panel l RF l CMOS l FPGA l lithography l EDA seal l OLED l LCD l equipment l material l IP l power l SiCGaN l third generation l automotive semiconductor l filter l analog l RF baseband l large silicon l PA l MOSFET l photoresist l RISC – VIGBT l NOR l Mini – LED l OEM l polarizer l ODM Huawei l Tesla l millet l etcher l MLCC l power management Qualcomm l passive components L CREE l Samsung l MCU l TSMC DRAM l AIoT l MLCC l Energy storage l Sodium ion l Electronic gas
The development path of Sanan Optoelectronics is similar to that of Wolfspeed. As a leader in the LED field, it has extended to the third generation of semiconductors with the same technology and gradually developed into a leading compound semiconductor giant in the industry.
The traditional LED cycle has warmed up and the Mini LED industry has exploded. The company will benefit significantly as the industry leader. Located at the upstream of the industrial chain, San’an Optoelectronics was founded in 2000. The first self-produced epitaxial chip came out in 2002. In 2003, it developed LED chips with independent intellectual property rights in China, breaking the history of LED import in China. At present, the company has achieved the integrated production capacity of the LED industry chain and continues to continue the spirit of innovation. With more than 20 years of solid technology accumulation in the LED industry, the company has made a forward-looking layout of the Mini/Micro LED new display technology.
The first phase of semiconductor industrialization project was launched in November 2019 to expand the capacity of Mini/Micro LED chips and packaging, with 1.61 million GaN/Micro LED chips per year and 176000 GaAs/Micro LED chips per year. In addition, the company actively carried out strategic cooperation with Samsung, TCL and other leading enterprises, and continued to strengthen technical capabilities. According to the data of GGII, the size of China’s MiniLED market in 2019 is about 1.6 billion yuan, and the size of the MiniLED market in 2020 is expected to reach 3.78 billion yuan, up 140% year on year. Based on this, the Prospective Industry Research Institute estimates that the market size of China’s MiniLED industry is expected to exceed 40 billion yuan in 2026, with a growth space of more than 10 times. We believe that under the background of downstream demand explosion, the company will actively innovate its layout, further consolidate its leading position in the industry and continuously enhance its profitability.
The company takes the lead in the layout of compound semiconductors, with a full-chain layout from substrate to device. San’an Optoelectronics set up its wholly-owned subsidiary San’an Integration in 2014. As the first compound semiconductor wafer foundry based on 6-inch wafers in China, San’an Integration has corresponding investment and planning from wireless RF IC based on gallium arsenide materials to wide bandgap power semiconductor based on silicon carbide and gallium nitride materials, to laser light source and optical detection chip based on gallium arsenide and indium phosphide materials; Sanan Integration is committed to becoming a world-class compound semiconductor R&D, manufacturing and service platform, serving IDH and IDM worldwide. At present, the first phase of the Hunan project has been put into production, with an estimated annual output of 400000 SiC wafers per year; Gallium arsenide RF expansion equipment has been gradually put in place, with the production capacity reaching 8000 pieces/month.
We believe that the company, as the leader of LED industry, will achieve cost reduction and efficiency increase based on the integration of LED industry chain to ensure stable revenue. On this basis, the company has actively laid out the third-generation semiconductors, built production lines and strategic cooperation with downstream TCL, Samsung and other enterprises. Now it has realized the supply of segmented products in the four fields of microwave radio frequency, optoelectronics, power electronics and optical communication. In the future, under the background of high demand in the downstream, when the company’s capacity is continuously released, it will continue to drive the growth of the company’s revenue scale.
Investment rating and valuation: We estimate that the company’s revenue from 2021 to 2023 will be 123.20 billion yuan, 16.06 billion yuan and 20.276 billion yuan respectively, the net profit attributable to the parent company will be 2.138 billion yuan, 29.40 billion yuan and 3.945 billion yuan respectively, and the EPS will be 0.48, 0.66 and 0.88 yuan respectively, maintaining the company’s “strongly recommended” rating.
Risk tips: the epidemic situation rebounded beyond expectation and affected production; The popularity of new display applications such as Mini LED is less than expected; The demand of traditional LED industry is sluggish; The capacity release progress of Changsha, Hubei and other projects is less than expected; It is difficult to reduce the cost of compound semiconductor materials such as silicon carbide, and the technology iteration is less than expected.